China Internet Executives Get a Seat at the Table in Beijing

Between questions of censorship, laws that require complicated listings in U.S. markets, and fierce and often public confrontations between companies, China’s Internet industry has always had an uncomfortable relationship with the government.

So it’s no small thing that this year, for the first time, the government took special steps to ensure more representatives from the industry could join China’s rubber-stamp parliament, the National People’s Congress, and its advisory body, the Chinese People’s Political Consultative Conference.

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Two security officers watch over the opening session of the Chinese People’s Political Consultative Conference (CPPCC) at the Great Hall of the People in Beijing on March 3, 2013.

According to two people who were part of the consultation process to choose delegates, the change primarily reflects the government’s recognition that leaders of the relatively new industry can be counted among China’s most important business leaders. In August, the United Front Work Department, the branch of the party in charge of bringing in useful people who are not party members to cooperate with the party, held a meeting attended by representatives from about 20 of China’s most important Internet companies, according to a person who attended. At the meeting, the representatives were asked about issues facing the industry, what leaders they thought should be nominated and also what other people should be consulted, according to the person.

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Six months later, the result has been an unprecedented number of Internet pioneers in both the NPC and CPPCC. In the relatively more important NPC is Tencent Holdings Ltd. Chief Executive Pony Ma and entrepreneur Lei Jun, while Baidu Inc. Chief Executive Robin Li, Shanda Games Ltd. Chief Executive Chen Tianqiao, and Sina Corp. board member Zhang Yichen are among the others who are members of the CPPCC.

Although the two bodies have little real power – celebrities such as Jackie Chan and Yao Ming also grace this year’s congresses as delegates – the person who attended the meeting said the new appointees would help the industry raise more key issues to officials at the highest levels of government.

“It’s a specialty of China, if you don’t have an official title, it will be difficult to make your voice heard by those above you,” the person said. For example, Mr. Lei issued recommendations on Monday to streamline the process for starting a company in China, an issue that entrepreneurs have long hoped the government would give more attention.

Though delegates can only recommend policies and often have minimal immediate impact on policy, over time the perspectives can guide policy changes, analysts say.

Ahead of the meeting, Baidu’s Mr. Li made calls to lift restrictions on U.S.-listed companies making acquisitions within China, local media said. Baidu is a U.S.-listed company and has been linked to a possible investment in a number of smaller Chinese Internet companies.

And just as the government has been taking Internet company leaders more seriously, so too have Internet companies been focusing more time on their own government relations, according to industry insiders. It’s an indication of how important good communication channels are in an unpredictably regulated industry.

Though analysts point out that rubbing shoulders with China’s political leaders is unlikely to help soften the government’s stance on censorship, for major companies like Baidu and Tencent, it nonetheless can help with the government’s regulation of other facets of the Internet industry.

For instance, in recent years when disputes have broken out between companies, in particular two conflicts between Qihoo 360 Technology Co. and first Tencent and then Baidu, it’s the government that often has the last word.

Also looming are new laws the government is trying to pass to increase oversight of smartphone software, including operating systems and applications. Although smartphone makers are the most worried about the proposed law, which would require new testing and registration processes each time software on a smartphone is updated, the law also refers to standards that could force companies to help the government identify users and track their application use.

That would be bad news for both Tencent and Baidu as the companies are striving to increase their presence in the smartphone market and also potentially expand abroad. Although it’s unlikely to have a major impact, a bit of quiet opposition from China’s newly inaugurated political leaders of the Internet industry might lead to some tweaks in policies like the smartphone law in the future.

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